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Reputation and Production Standards

Author

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  • McCluskey, Jill J.
  • Loureiro, Maria L.

Abstract

This paper analyzes a monopolist's behavior when consumers cannot observe the production standards. These types of products are usually known as credence goods. The steady-state level of quality with credence goods is found to be lower than that with experience goods, and perfect information goods. The finding that only perceived quality, which is effectively a filtered version of true quality, affects reputation indicates rewards for high quality production are lower in the credence good case. Further, an increase in the level of monitoring can increase the true level of product quality in the market for credence goods.

Suggested Citation

  • McCluskey, Jill J. & Loureiro, Maria L., 2005. "Reputation and Production Standards," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 30(01), April.
  • Handle: RePEc:ags:jlaare:30788
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    File URL: http://purl.umn.edu/30788
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    References listed on IDEAS

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    1. Doughety, Andrew F & Reinganum, Jennifer F, 1997. "Everybody Out of the Pool: Products Liability, Punitive Damages, and Competition," Journal of Law, Economics, and Organization, Oxford University Press, vol. 13(2), pages 410-432, October.
    2. Noe, Thomas H. & Rebello, Michael J., 1995. "Consumer activism, producer groups, and production standards," Journal of Economic Behavior & Organization, Elsevier, vol. 27(1), pages 69-85, June.
    3. Sheshinski, Eytan, 1976. "Price, Quality and Quantity Regulation in Monopoly Situations," Economica, London School of Economics and Political Science, vol. 43(17), pages 127-137, May.
    4. McCluskey, Jill J., 2000. "A Game Theoretic Approach To Organic Foods: An Analysis Of Asymmetric Information And Policy," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 29(1), April.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Grolleau, Gilles & Caswell, Julie A., 2006. "Interaction Between Food Attributes in Markets: The Case of Environmental Labeling," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 31(03), December.
    2. repec:oup:erevae:v:44:y:2017:i:4:p:658-682. is not listed on IDEAS
    3. Dai, Yunhao & Kong, Dongmin & Wang, Maobin, 2013. "Investor reactions to food safety incidents: Evidence from the Chinese milk industry2We thank Colin Poulton (Managing Editor), two anonymous referees, Martin Qiu, Shasha Liu, and Yan Sheng for helpful," Food Policy, Elsevier, vol. 43(C), pages 23-31.
    4. Galloway, Kristin & Bailey, DeeVon, 2005. "A Rose by Another Name: An Objective Analysis of an Established Market for Credence Attributes," 2005 Annual meeting, July 24-27, Providence, RI 19493, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    5. Gelaw, Fekadu & Speelman, Stijn & Van Huylenbroeck, Guido, 2016. "Farmers’ marketing preferences in local coffee markets: Evidence from a choice experiment in Ethiopia," Food Policy, Elsevier, vol. 61(C), pages 92-102.
    6. Sergey Belev & Olga Boldareva & Ilya Sokolov & Anna Zolotareva, 2013. "Features of the Public Procurements of Innovation Products in Russian and the World," Published Papers 166, Gaidar Institute for Economic Policy, revised 2013.
    7. Cuffaro, Nadia & Di Giacinto, Marina, 2015. "Credence goods, consumers’ trust in regulation and high quality exports," Bio-based and Applied Economics Journal, Italian Association of Agricultural and Applied Economics (AIEAA), issue 2, August.
    8. Pozo, Veronica F. & Saak, Alexander E. & Hanawa-Peterson, Hikaru, 2009. "Product Origin and Reputation for Quality: the Case of Organic Foods," 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin 49503, Agricultural and Applied Economics Association.

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